WHAT’S BEHIND THE MADOFF MADNESS?

Whenever a serial killer is arrested at home and hauled off to jail, interviews with neighbors usually produce comments like: “He seemed like such a nice man. Quiet, but polite. And he always kept his lawn mowed.”

Whenever a serial killer is arrested at home and hauled off to jail, interviews with neighbors usually produce comments like: “He seemed like such a nice man. Quiet, but polite. And he always kept his lawn mowed.”

That same sense of disbelief flowed from the upper-crust, New York socialites who were clients – and victims – of renowned money manager Bernard Madoff. His investment firm returned impossibly-high returns to these swells for decades – until the whole thing came apart a few weeks ago, revealing that Madoff was running the largest Ponzi scheme in history. The clients, now looking at up to $50 billion in losses, couldn’t believe they’d been duped by Bernie. “Why, he was a member of the club,” they gasped, “a pillar of the establishment.”

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But what the Madoff madness really reveals is not merely individual naiveté, but the abject failure of Bush-style, laissez-fairyland regulation. This approach is no regulation at all – rather, regulated industries are trusted to do the right thing, and any enforcement of rules should be done voluntarily by the violators. It’s a gentlemanly sort of thing, don’t you know?

So Madoff, a consummate gentleman, was able to live the high life by gently rolling his own social set with an age-old fraud that was widespread and transparent. Where was the Securities and Exchange Commission, the federal cop that’s supposed to cover this beat? Gone, effectively removed by the no-reg ideologues in the SEC, White House, and Congress. They slashed the enforcement budget to keep the agency from doing its job. Indeed, when Madoff was accused years ago of running a scam, SEC investigators relied on information voluntarily supplied by Madoff himself to dismiss the charges.

Not only has Madoff been nailed – so has the SEC. Time to put the cop back on the beat.

“S.E.C. Issues Mea Culpa On Madoff,” The New York Times, December 17, 2008.

“You Mean That Bernie Madoff?” The New York Times, December 19, 2008.

“The Madoff Economy,” The New York Times, December 19, 2008.

“Battling the bastards is about as much fun as you can have with your clothes on.”

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